Dear Dr. Don,
Is it legal for a bank that closed a checking account for nonsufficient funds to report on my ChexSystems report and my credit bureau reports? If not, how do I dispute this? I have had one bank that has done this (which I am disputing), but I have never had another bank report it to my credit report as well.
-- Lisa Laments
Dear Lisa,
As you've discovered, the nonsufficient funds incident in your checking account is reported by ChexSystems, the consumer reporting agency for banking relationships.
That negative information will remain on your ChexSystems report for five years, even if you resolve the NSF issue.
ChexSystems has to follow the provisions of the Fair Credit Reporting Act, including the dispute process. It also has to provide consumers with one free copy of their report each year. The ChexSystems Consumer Assistance Web page "FACTA Free Annual Report" allows you to request this report online.
Typically, an NSF problem in your bank account migrates to your credit report when the NSF is turned over to a collections agency. At that point, it's considered a debt owed and can be reflected on your credit report. This type of negative information stays on your credit report for seven years.
If the NSF was cured before the account actually went to collections, you could have a legitimate dispute on your credit reports. The Bankrate feature "How to fix credit report errors" can help, as can the FTC Facts for Consumers publication "How to Dispute Credit Report Errors."
It sounds like you need to stop kiting checks. The Federal Reserve Board publication "Protecting Yourself from Overdraft and Bounced-Checks Fees" provides a nice primer on the topic.
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